The UK’s brewing industry is finally emerging from the frenzy of corporate activity that forced some of its major players to put their brand marketing strategies on hold. After three tortuous years of takeovers, the makeovers are about to begin.
While corporate financiers and the academics at regulatory bodies have been settling the ownership of Britain’s top beer brands and the brewing operations behind them, beer marketers have taken a back seat. But now that the corporate work has run its course, it is up to marketers to start rebuilding their brand portfolios.
The announcement last week that Interbrew UK is to take over the brewing rights for Castlemaine XXXX from Carlsberg-Tetley and stage a massive relaunch of the Australian lager signals that the beer wars are back.
In the rapidly consolidating beer market, insiders are predicting the emergence of six major brands – probably Foster’s, John Smith’s, Guinness, Stella Artois, Budweiser and Carling. Over the next decade, the battle will be on to establish the dominance of these market leaders. Secondary brands may be gradually squeezed to death in the middle market, as niche brands increase in popularity. For the challenger brands, it will be a long, hard fight.
As Interbrew UK marketing director Richard Evans says: “Certain aspects of some companies’ strategies have been on hold as a result of the changes in ownership, but the market marches on.” Of Interbrew’s acquisition of the brewing and distribution rights to XXXX, he says: “We are seeing a clarification of our standard lager strategy, which has been veiled in mystery.”
Last week may go down as a watershed in British beer history. Alongside Interbrew’s Castlemaine move and the appointment of ad agency Mother to handle the brand’s relaunch backed by a £9m ad spend (MW last week), a round of other key announcements were made.
Carling, which has built up its image over many years as an essentially English lager, is to be introduced to Scotland, a market dominated until now by McEwan’s and Tennent’s. Meanwhile Tennent’s is to mount a major push in the English market for the first time. This will be particularly interesting as the marketing director of Coors, the US company which now owns Carling, is Mark Hunter – a Scot who formerly headed marketing for Tennent’s.
Meanwhile, Bass Ale is to be backed by a new marketing campaign through Lowe London. And Murphy’s Irish Stout – the stout brand which is the only real challenger to Guinness – is to be relaunched by Bartle Bogle Hegarty with a £5m campaign in November.
Bass’s and Whitbread’s decisions in 2000 to quit brewing and concentrate on pubs, restaurants and hotels broke for good the distorting vertical integration of the UK beer market. For over a century, the brewers sold their beer through their own pub estates and drinkers were happy to swill down whatever they were given. If they didn’t like it, they could go elsewhere. The brewers sat back and watched the profits stream in. But now – largely because of the 1989 Beer Orders, which forced the companies to choose between brewing and retailing – the vertical link has been progressively dismantled.
Bass’s brewing operations have been taken over by US giant Coors and Whitbread’s have fallen to Interbrew. Neither have assured distribution for their brands. Success for a brand will rest on how it is marketed and distributed. And, of course, what it tastes like.
Consolidation is hitting all consumer markets and beer is no different, with each brewer putting maximum marketing firepower behind its chosen brands. Some of Britain’s favourite beers may be axed from portfolios as the new brewing order is introduced. Carlsberg-Tetley, for instance, is concentrating its marketing budget on Carlsberg, Carlsberg Export and Tetley’s Bitter. A Carlsberg-Tetley spokeswoman says: “It’s all about concentrating on core brands. We are really focusing on Carlsberg, Carlsberg Export and Tetley.”
Never forget the basics
In a market that has become increasingly dependent on premium lagers for its profits, the standard lager sector may seem like a distraction. The likes of Interbrew’s Stella Artois, Scottish Courage’s Kronenbourg and Anheuser-Busch’s Budweiser have been the glamorous choice in recent years for drinkers and brewers alike. But the brewers still need to offer standard lagers – those with an alcohol by volume level of about four per cent. Many drinkers prefer these weaker beers, and premium lager drinkers may drink a weaker beer if they are on a long session.
Mother’s relaunch campaign for Castlemaine will run from early next year. Interbrew has taken control of the brand as a replacement for Heineken Cold Filtered, which the former Whitbread distributed for many years. This will be phased out when Heineken UK launches its premium international brand next year.
Mother joined Interbrew’s roster through the latter’s takeover of Whitbread’s brewing interests, for which Mother had run campaigns for Vodka Source and the ill-fated GB Lager. GB was test-launched by Whitbread, but never progressed beyond its regional test markets. Evans says that it is diffi
cult building up a new brand from scratch, but taking on an existing brand – such as XXXX – with strong heritage is much more straightforward.
He is confident of Interbrew’s ability to turn XXXX into a major brand in the UK once again. He says: “During next year, we will shift our focus to XXXX and restore it to its former glory.”
This will be quite a job. While XXXX became a leading brand in the Eighties and early Nineties, through its comic and vulgar Australian campaigns, its prominence has faded in the past few years. From its 1984 slogan “Australians wouldn’t give a XXXX for anything else” to the punchier but less amusing “Fresh as XXXX”, unveiled in 1996, XXXX advertised its way to the fore. But its market share has been declining for years, as Carlsberg-Tetley wrestled with the problem of how to market a brand that was directly competing with its own core product, Carlsberg. In 1993, XXXX had 6.8 per cent of the standard lager market by volume, but by 1998 this had fallen to 3.6 per cent. It now has a tiny 1.5 per cent share, with annual sales of just £79m.
According to Evans, whatever advertising line Mother manages to come up with for XXXX – and the agency is likely to revive the jokey Australian imagery – is a bit of a side issue: “There’s more to building lager than advertising. What is critical is whether the company is focused on distribution.” Interbrew’s ability to strike distribution deals through thousands of pubs will determine the success of the Castlemaine relaunch.
The soon-to-be-culled Heineken Cold Filtered has a ten per cent volume share of the standard lager market and has distribution through between 15,000 and 20,000 pubs. Interbrew will have to persuade these customers to switch to XXXX.
Is Castlemaine XXXX-ed?
But Scottish Courage, which distributes Australian rival Foster’s, is dismissive of Interbrew’s prospects in a head on battle for “Aussieness” between XXXX and Foster’s. “I would be surprised if there was a resumption of the battle. It is all over bar the shouting,” says Sottish Courage brand director for Foster’s and John Smith’s John Botia.
He says that in the Eighties, when Foster’s and Castlemaine were fighting it out, the market was far more focused on the pub and club trade, which accounted for 90 per cent of sales. These days this sector is down to 66 per cent, with the take-home trade making big inroads. He says that the six major brands in the market already account for 40 per cent of lager sales by volume and predicts that by 2010 they could take up to two-thirds of the market.
Botia doubts that the relaunched XXXX will make much of an impact on the market. “XXXX’s decline has been marked – it is down 30 to 40 per cent year on year. Interbrew has its work cut out to turn the brand around. It is talking about spending £9m, but the big boys are spending £20m. Brands outside the top six will find it difficult to make progress. The middle is an uncomfortable place to be.”
But he believes that, despite market consolidation, consumers will benefit from the shaken-up beer market by having a greater choice of niche products, as opposed to there being a loss of variety caused by the dominance of a few brands. Whether there are, in fact, large numbers of Scots gagging for Carling in Scotland, and millions of other drinkers desperate to have Castlemaine relaunched, is a moot point. It may be that, despite the break-up of their vertically integrated empires, the brewers are still calling the shots, rather than responding to consumer demand for a better pint.